Please enable JavaScript.
Coggle requires JavaScript to display documents.
ESTABLISHING A PAY STRUCTURE (Chapter 12_Lec 9, image - Coggle Diagram
ESTABLISHING A PAY STRUCTURE
(Chapter 12_Lec 9
Decisions About Pay
Pay Structure
Pay policy resulting from job structure and pay level decisions
Pay Level
Average amount the organization pays for a particular job
Job Structure
Relative pay for different jobs within organization
Legal Requirements for Pay
Equal Employment Opportunity
Differences in pay must not be based on employees’ age, sex, race, or other protected status
Laws do not guarantee equal pay; there are so many legitimate factors that influence a person’s earnings
Comparable-worth policies
The Lilly Ledbetter Fair Pay Act of 2009
Minium Wage
States as an amount of pay per hour
Lowest amount employers may pay under federal or state law
Fair Labor Standards Act (FLSA):
Federal law that establishes minimum wage and requirements for overtime pay and child labor
Overtime Pay
Overtime is hours worked beyond 40 hours per week
Under FLSA, employers must pay 1.5 times employee’s usual rate for overtime hours
Exempt employees – managers, outside salespeople, and other employees not covered by the FLSA requirement
Nonexempt employees – employees covered by FLSA requirements for overtime pay
Child Labor
FLSA sharply restricts use of child labor
Children under 14 may not be employed
Children aged 14 and 15 may work only outside school hours, in nonhazardous jobs, and for limited time periods
Children aged 16 and 17 may not be employed in hazardous jobs
Exemptions:
babysitting, acting, delivering newspapers
Prevailing Wages
(Lương hiện hành)
Federal contractors must pay employees at least equal to the prevailing wages in the area
Prevailing rates – 30% of the local labor force
Davis-Bacon Act of 1931
Walsh-Healy Public Contracts Act of 1936
Pay Ratio Reporting
Must report ratio of CEO pay to pay of median employee
Intended to increase transparency and make social responsibility a more vital part of pay policies
Economic Influences on Pay
Product Markets
Organizations that offer similar goods and services
Cost of labor a significant part of organization’s costs
Organizations compete on quality, service, and price
Labor Market
Organizations must compete to obtain human resources
Competition establishes minimum pay to hire an employee for a job
Pay Level: Deciding What to Pay
Market rate versus paying above market rate to acquire top talent
Pay policies are one of most important HR tools to encourage desired behaviors and discourage undesired behaviors
Ranges depend on the competitive environment
Gathering Information about Market Pay
Benchmarking:
a procedure in which an organization compares its own practices against those of successful competitors
Multiple sources of data
Pay surveys
Bureau of Labor Statistics (BLS)
Society for Human Resource Management (SHRM)
Consulting groups
Employee Judgments about Pay Fairness
Judging Fairness (Equity)
Employees judge fairness in different ways
Internal equity: fairness of one’s pay relative to pay of co-workers
External equity: fairness of one’s pay relative to what employees in other organizations earn doing the same job
Employee responses to judgment of equity can have great impact on organization
Employees who perceive they are under-rewarded are
likely to make up the difference in one of three ways
Putting forth less effort (reducing inputs)
Finding ways to increase outcomes (e.g., stealing)
Withdrawing by leaving or refusing to cooperate
Communicating Fairness
Employees care about their pay relative to others’ pay
These feelings are based on what employees perceive
Employees can easily gather pay data using Internet
Companies should be transparent about pay policies with employees, especially if pay is competitive or generous
Job Structure: Relative Value of Jobs
Job Evaluation
Committee identifies each job’s
compensable factors
Characteristics organization values and is willing to pay for
Jobs rated for each factor
Measures relative internal worth of organization’s jobs
Key Jobs
Organizations define key jobs to help create pay structures
Key jobs have relatively stable content and are common among many organizations
Pay for key jobs can be based on survey data
Pay Structure: Putting It All Together
Pay Rates
Nonkey jobs often have no survey data available; professional must base rate off job evaluation by plotting data on grapth
Pay policy line
on graph shows relationship between job evaluation points and pay rates
Rates of key jobs can be based on market research
Pay Grades
Sets of jobs having similar worth or content grouped together to establish rates of pay
May not match market rate
Pay Ranges
Flexibility helps organization balance conflicting
information from job evaluations and market surveys
Usually pay ranges overlap somewhat
Set of possible pay rates defined by a
minimum, maximum, and midpoint
of pay for employees holding a particular job or a job within a particular pay grade
Pay Differentials
Adjustment to pay rate to reflect differences in working conditions or labor markets
Differentials often offered in U.S. by geographic location
Common approach is to move employee
higher in pay
structure to compensate for
higher cost of living
Alternatives to Job-Based Pay
Delayering
More assignments combined into single layer called a broad band
More emphasis on acquiring experience, not promotions
Reducing number of levels in organization’s job structure
Skill-Based Pay Systems
Pay set according to employees’ levels of skill or knowledge
Appropriate where changing technology requires employees to continually widen and deepen their knowledge
Pay Structure and Actual Pay
Compa-Ratio
Ratio of average pay to the midpoint of pay range
Ensures that pay policies and practices match
If average equals midpoint, CR is 1
If CR is greater than 1, average pay is above midpoint
If CR is less than 1, average pay is below midpoint
Current Issues Involving Pay Structure
Pay during Military Duty
Pay for Executives
